Last week, Prime Minister Stephen Harper introduced new spending and tax breaks worth CAD40 billion (USD33 billion) over the next two years. Much of the money will go to maintaining roads, railways and ports and in encouraging home improvements.

The government is also adding CAD50 billion to its CAD75 billion fund to buy mortgage-backed securities from banks, to encourage them to lend.

For the first time since 1996 the federal budget will move into deficit, with a shortfall of CAD34 billion in the fiscal year starting in April. Deficits will total some CAD85 billion before the federal finances return to the black in four years.

At the end of the day, the goal of any stimulus plan is to excite economic activity–to boost aggregate demand. Although the direct impact of Canada’s budget on any particular sector is limited from an investor’s perspective, there are important implications for the trusts included in the Canadian Edge How They Rate coverage universe. Here’s a section-by-section take on the budget’s impact and the current outlook; bear in mind, some segments and companies will feel the stimulus more than others.

Oil and Gas. After the washout of the past several months, energy trusts aren’t just pricing in oil at USD40 or even USD30 but sell at basically the same prices they did when oil sold for less than USD20. Recent dividend cuts have had progressively less impact on prices. In fact, some trusts have actually rallied afterward.

Second, producer trusts have proven their ability to survive on their own resources. Debt levels are low and with a few exceptions there’s no danger of bankruptcy, even if energy prices continue to sag.

Finally, the violence of energy prices’ fall has guaranteed another upward spike, once the global economy stabilizes. And when that happens, energy trust share prices will return to last summer’s heights, and quite possibly well beyond them.

Global economic weakness means we’re going to have to be patient and possibly suffer some near-term downside. But this is no time to abandon trusts that have proven their ability to weather rough times and profit when conditions improve.

Electric Power. The Conservative budget was light on spending that would have directly impacted so-called green energy initiatives. But the nature of the business means cash flows and distributions are essentially bullet-proof.

Great Lakes Hydro Income Fund (TSX: GLH-U, OTC: GLHIF), for example, was one of the very few trusts to hold its value over the past year.

Great Lakes recently completed two acquisitions that together should generate CAD13 million of distributable cash flow annually, feature CAD240 million in “favorable tax attributes” and are well known to management. The deals should be immediately accretive to Great Lakes’ distributable cash flow, reducing the payout ratio, enhancing liquidity and further aiding management’s goal of being able to maintain the current CAD1.25 annual distribution rate well past 2011.

No one is going to get rich quick with Great Lakes. But the 8 percent dividend and modest growth potential are an ideal way to get rich slow, and this is an ideal income pick for the most conservative investors.

Gas/Propane. Energy Savings Income Fund (TSX: SIF-U, OTC: ESIUF) has kept on keepin’ on throughout more than two years of stress tests. As with the Electric Power segment, there’s nothing in Canada’s stimulative budget that speaks directly to Energy Savings.

Management forecast strong results for 2009, and expects to be able to pay at least the same distribution in 2011 it does now. A recent special cash distribution of CAD0.10 per unit–at the high end of management’s previous projection–reflects “the solid operating performance of the fund during the current quarter.” (Its fiscal third quarter, which ended Dec. 31.)

CEO Rebecca McDonald went on to state last month that “Energy Savings is a unique vehicle that will perform despite the recession.” Bay Street has apparently also concurred, giving the company high marks.

Business Trusts. Stimulus packages the world over include billions devoted to infrastructure spending–roads, bridges, public transit, power transmission, schools, ports, etc. Canada is no different.

The budget Mr. Harper unveiled last week includes an acceleration of funds previously set aside to build–or rebuild–elements of Canada’s economic plant as well as new commitments. Nearly CAD20-billion–about half the stimulus package–is intended to spur immediate spending on infrastructure projects and home construction.

Nearly CAD12 billion federal dollars will be made available for “shovel ready” public works projects across Canada that can be commenced quickly. Provinces and municipalities will contribute nearly CAD9 billion more in order to get the roads, bridges and sewer upgrade work started.

This is good news for a recent addition to the Canadian Edge Conservative Portfolio, Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF), and for another trust we follow in How They Rate, IBI Income Fund (TSX: IBG-U, OTC: IBIBF).

IBI units have lost 40 percent of their value in the past year as the world economic slump deepened. But IBI’s four areas of practice–urban land, facilities, transportation and systems–from offices across Canada, the US, Europe, the Middle East and Asia–seem ideally suited to benefit from the huge buildup in spending on all manner of public projects in housing, transportation, economic growth and environmental quality.

Real Estate Trusts. Residential REITs are likely to experience less difficulties in the current economic environment because of access to Canada Mortgage and Housing Corp (CMHC) financing.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF), for example, announced the purchase of a 153 suite luxury apartment building in Quebec City, Quebec, for CAD17.8 million last month.

The deal was financed safely with a CMHC-insured mortgage at an interest rate of 4.21 percent, a five-year mortgage at a rate of 3.62 percent and cash from reserves. And the property is 99 percent occupied, complimenting the REIT’s existing properties in the region.

In short, the deal offers a fair and transparent low risk return to the REIT, come what may for the economy. That’s typical of every deal management does.

Natural Resources. Output cuts by Canadian lumber producers should prevent a glut from weakening demand from the recession and a plunge in US home construction, but it’s not a good development for companies that rely on pulp to produce paper or wood waste to generate power.

The story here, as it is for other commodities, is aggregate demand: Once the Canadian and global economies return to normal activity, things will pick up–for those companies with solid balance sheets able to survive.

Energy Services. The spate of cancelled projects in Canada and elsewhere means this group–directional drillers, transporters, and clean-up services–will likely struggle until the economy rebounds and exploration and production pick up again.

Once the global economy rebounds and the realities of supply and demand in a normal-growth environment prevail, this group will bounce back sharply.

Energy Infrastructure. Carbon capture and storage (and nuclear power) is the top energy priority in Harper’s budget. A CAD1 billion clean-energy fund will finance carbon capture and storage (CCS) projects over the next five years. The CCS projects could be key to sustaining the massive investment in tar-sands-based oil production in Alberta and Saskatchewan.

Some investors seem to be betting on a fall off in revenue from Pembina Pipeline Income Fund’s (TSX: PIF-U, OTC: PMBIF) oil sands division, given the huge drop in oil prices and the recent scaling back of several big developments there. Pembina’s contracts, however, are with only the strongest producers. Its exclusive transportation contract with the Syncrude venture, for example, is backed by the likes of ExxonMobil (NYSE: XOM). And all contracts are based on capacity, not throughput. Even if Syncrude doesn’t want to mine the tar sands a particular month, it still has to pay Pembina.

The rumors of the death of Canada’s oil sands are greatly exaggerated. True, it’s highly risky to build a project now that needs USD80 to USD90 per barrel oil to be economic. But neither is it in dispute that oil sands output is needed to meet normal demand. And unless the world sinks into an increasingly unlikely permanent depression, normal demand is what we’re going to get.

Whatever the case, Pembina is going to get paid. And that’s the name of the game for maintaining and increasing its now very generous distribution to 2011 taxation and beyond.

Information Technology. Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF), a High Yield of the Month pick in the January CE, benefited greatly from the collapse of the privatization deal of its parent BCE (TSX: BCE, NYSE: BCE). Now under no pressure to reduce debt, BCE won’t have to unload its stake in Bell Aliant. In fact, BCE management may elect to buy up the trust shares it doesn’t already own to maximize its cash flow from them. A transaction at book value alone would require a price of CAD33.

Bell Aliant will continue to be challenged by the growth of competition from wireless and cable television rivals, just as incumbent telecoms are across the continent. Its long-term health will depend on finding new systems to absorb and upselling users to advanced services, while holding onto current customers with new technology, better service and competitive rates. Thus far in the North American bear market/recession, the trust has been able to do that with ease.

Financial Services. The biggest headline number in the budget is the additional CAD125 billion set aside to boost access to credit for households and businesses, an issue that Mr. Flaherty identified as the No. 1 concern during his prebudget consultations.

Prior to the budget, Ottawa pledged to acquire CAD75 billion of insured mortgages from the banks to free up additional cash for lending. The budget as tabled includes a commitment from the government to boost that amount by CAD50 billion to CAD125 billion.

There’s also a promise to increase the lending capacity at Export Development Canada and the Business Development Bank of Canada (BDC) by an additional CAD13 billion. And the budget will allocate up to CAD12 billion to establish a new facility to backstop car and equipment leasing.

Other measures include extending until the end of 2009 the availability of insurance on interbank lending as well as provisions to help small business.

Food and Hospitality. Cineplex Galaxy Income Fund (TSX: CGX-U, OTC: ) is Canada’s largest movie-theater operator. The fact that last month was the best January ever in terms of box office receipts (more than USD1 billion in ticket sales) underscores the fact that movie-going is recession-resistant.

Health Care. Health care is always in demand, no matter what the economic climate. And as a dominant player in two key areas–laboratory testing and medical imaging–CML Healthcare Income Fund’s (TSX: CLC-U, OTC: CMHIF) position is far more secure than most.

Health care companies in the US face an uncertain future as the incoming Obama administration forms its agenda. In contrast, CML has operated profitably under Canada’s national health care system since it was established in 1971 as a single medical laboratory in Ontario.

Transports. This group, which includes freight haulers CSS Income Fund (TSX: CSS-U, OTC: CSIUF) and TransForce Income Fund (TSX: TFI, OTC: TFIFF), will be challenged as long as economic growth is stagnant. Units of both are trading at depressed levels and bear double-digit yields. With strong operational records and the ability to withstand the weakness, CSS and TransForce could provide long-term gains for aggressive but patient investors.

Another Transport, heavy-duty vehicle manufacturer New Flyer Industries (TSX: NFI-U, OTC: NFYIF), recently reported that it ended 2008 with a USD4.1 billion order backlog. New Flyer, which makes 35-, 40- and 60-foot buses with clean diesel, diesel-electric hybrid, gasoline-electric hybrid and compressed natural gas (CNG) propulsion systems, is winning business from new and old customers alike.

Davos Dispatch

We couldn’t make it to the World Economic Forum, but chief New York Times financial correspondent Floyd Norris did:

Coconuts and Bank Prices

DAVOS

Two observations from the World Economic Forum:

Montek Ahluwalia, the deputy chairman of the Planning Commission in India, told a panel on the world economy:

“Confidence grows at the rate a coconut tree grows. It falls at the rate a coconut falls.”

Martin Halusa, the chief executive of Apax Partners, noted how much financial sector values have fallen.

In early 2007, the Royal Bank of Scotland led a consortium that included the Fortis Group of Belgium and Santander of Spain. It paid $100 billion to acquire the Dutch bank, ABN Amro.

Had they held on to the $100 billion, those institutions could now buy Citigroup, Goldman Sachs, Morgan Stanley, Merrill Lynch, Deutsche Bank and Barclays. And they would have enough left over to buy General Motors, Ford and Chrysler.

The Roundup

Oil and Gas

Canadian Oil Sands Trust (TSX: COS-U, OTC: COSWF), which holds the biggest stake in the Syncrude venture, reported that fourth quarter profit fell 76 percent as oil prices dropped and costs rose. The trust, which has a 37 percent stake in Syncrude, the world’s largest oil sands producer, cut its quarterly cash distribution to CAD0.15 per unit from CAD0.75 to manage liquidity.

Canadian Oil Sands earned CAD124 million (CAD0.26 per unit) in the fourth quarter, down from CAD515 million (CAD1.07 per unit) a year ago. Analysts were expecting a CAD0.32 per unit profit. Cash from operating activities increased to CAD466 million (CAD0.97 per unit), up from CAD367 million (CAD0.77 per unit). Operating costs per barrel rose to CAD32.10 from CAD27.38.

The trust said it estimated annual Syncrude production in 2009 would be 115 million barrels, within a range of 110 million to 120 million. Costs are expected to be CAD30.76 a barrel, with Syncrude’s capital expenditures seen at CAD1.2 billion, CAD440 million from the trust.

Canadian Oil Sands Trust, the subject of takeover rumors in the wake of Total’s (NYSE: TOT) unsolicited CAD617 million offer for fellow oil sands player UTS (TSX: UTS, OTC: UEYCF), remains a buy up to USD22.

Enerplus Resources (TSX: ERF-U, NYSE: ERF), in response to persistently low commodity prices, has trimmed its distribution; the February payment will be CAD0.18 per unit, down from CAD0.25 in January.

In a press release announcing the cut, CEO Gordon Kerr said, “Over the past two months, crude oil and natural gas prices have continued to decrease. With this continued commodity price downturn, combined with on-going uncertainty in the capital markets, we believe it is prudent to reduce distributions to unitholders at this time.

“We believe this will preserve our balance sheet advantage and continue to keep us in a position to improve our asset base through acquisitions.”

About 42 percent of Enerplus’ output is oil, while 58 percent is natural gas. Focused on holding down debt and pursuing expansion, Enerplus Resources is a buy up to USD30.

Penn West Energy Trust (TSX: PWT-U, NYSE: PWE) is raising CAD250 million by issuing about 17.7 million trust units to fund capital expenditures and to reduce current debt.

The trust has signed a deal with a syndicate of underwriters led by CIBC World Markets and BMO Capital Markets who have agreed to purchase the units at CAD14.10 per. Penn West Energy Trust is a buy up to USD20./P>

Electric Power

TransAlta Corp (TSX: TA, NYSE: TAC) reported a 27 percent decline in fourth quarter net income to CAD277 million (CAD0.46 per share) from CAD377 million (CAD0.70 per share) a year ago.

Revenue rose 6.5 percent to CAD2.33 billion, but TransCanada reported fourth quarter corporate expenses of CAD86 million, compared with net income of CAD17 million a year earlier when it had favorable income tax adjustments. The expenses included unrealized losses of CAD39 million (CAD0.07 per share) for the reduced value of derivatives used to lock in interest rates.

Excluding the losses on the derivatives, TransCanada earned CAD0.53 a share. The company declared a quarterly dividend of CAD0.38 a share, an increase of 5.6 percent, payable April 30 to shareholders of record on March 31.

TransAlta will proceed with the addition of two 23 megawatt (MW) efficiency upgrades at its Keephills plant in Alberta. Both Keephills units 1 and 2 will be upgraded to 406 MW and are expected to be operational by the end of 2011 and 2012, respectively. The total capital cost of the projects is estimated at CAD68 million. TransAlta Corp is a buy up to USD22.

Business Trusts

Norbord (TSX: NBD, OTC: NBDFF), languishing amid US and European housing market slumps that continue to sap demand for its oriented strand board (OSB), posted a loss of CAD30 million (CAD0.19 per share), compared to a loss of CAD13 million (CAD0.09 per share) a year ago.

Norbord was also hurt by higher input costs and a 30 percent cut in its European capacity in the fourth quarter. Norbord doesn’t expect a recovery in the housing markets in North America or Europe during 2009 and plans to limit capital expenditures to less than CAD25 million in 2009.

Norbord said the North American benchmark price for its OSB averaged at USD170 in the fourth quarter, down USD31 from the third quarter. The Toronto-based company, which also produces plywood and particleboard, has curtailed production, cut jobs, raised cash, suspended its dividend and amended credit lines. Hold Norbord.

Real Estate Trusts

Calloway REIT (TSX: CWT-U, OTC: CWYUF) has completed arrangements for a CAD105 million syndicated, revolving operating facility, secured against a pool of 10 properties. The floating rate facility has a term of up to 18 months and an interest rate of approximately 3.85 percent, based on current money market rates. Calloway REIT is a buy up to USD10.

Natural Resources

Rogers Sugar Income Fund’s (TSX: RSI-U, OTC: RSGUF) fiscal first quarter net profit fell to CAD73,000 (CAD0.00 per unit) from CAD18.5 million (CAD0.21 per unit) a year ago. Revenue for the three months ended Dec. 31 was down to CAD138.4 million from CAD173.1 million.

The company saw higher volumes of 185,732 ton for the quarter, up from 173,045 in the year-earlier period, based on increased liquid sugar and export sales. Offsetting that, however, was a drop in the company’s higher-margin consumer sales “due to the loss of volume to non-traditional retail accounts and to competitive market activities.” Rogers Sugar Income Fund is a buy up to USD4.

Energy Infrastructure

AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF) has completed a bought-deal agreement for the purchase and sale of 6.1 million units for CAD16.50 per by a syndicate of underwriters co-led by TD Securities and Clarus Securities.

The net proceeds of approximately CAD100 million will be used to reduce indebtedness. AltaGas has also entered into new revolving and term credit facilities to be arranged by TD Securities. The equity offering is scheduled to close on or before Feb. 10, while the credit arrangement will be finalized later in the month.

Toronto-Dominion Bank (TSX: TD, NYSE: TD) has committed CAD100 million under the credit facilities, an amount that may be increased if and when other lenders join the syndicate. The new credit facilities replace AltaGas’ existing 18-month credit facility, which expires in September 2009. AltaGas Income Trust is a buy up to USD25X.

Information Technology

Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF)reported fourth quarter earnings of CAD80 million on CAD813.2 million in revenue, compared with a profit of CAD117.4 million on CAD819.1 million in revenue in the fourth quarter of 2007.

The company took a CAD60 million charge in the quarter related to a decision to cut 500 management jobs in a move to streamline operations and improve its bottom line.

Bell Aliant management expects distributable cash to increase up to 10 percent for 2009. The fund said it expects to improve cash flow by a more targeted approach to capital spending, improving its cost structure and increasing profitability. Bell Aliant maintained its current distrubtion at CAD0.2417 per unit, or CAD2.90 on an annualized basis.

Internet revenue grew by 13 percent) in the fourth quarter of 2008 compared to the same period in 2007. High-speed Internet subscriber growth was 10.7 percent and residential high-speed average revenue per customer (ARPC) grew by 6.7 percent over the same quarter in 2007.

Distributable cash decreased 13.7 percent, driven by a concentration of capital expenditures in the fourth quarter compared to the same period a year ago. Distributable cash for the year increased 2 percent over 2007. Bell Aliant Regional Communications Income Fund is a buy up to USD25.

Financial Services

Bank of Nova Scotia (TSX: BNS, NYSE: BNS) paid CAD270 million to double its stake in Thailand-based Thanachart Bank. Scotiabank now owns 49 percent of Thanachart, reaching the regulatory limit for a foreign bank in Thailand.

Scotiabank has spent more than CAD2 billion on foreign acquisitions and bank stakes over the past three years, including lenders in Chile, Jamaica and the Dominican Republic. Scotiabank has operations in 50 countries and gets about a third of its profit from outside Canada.

Thanachart Bank is Thailand’s eighth-largest bank by assets. The bank plans to open 40 new branches by the end of 2009, to increase its network to 255 locations. The bank plans to focus on car financing, small business loans, and mortgages. Bank of Nova Scotia is a buy up to USD35.

CI Financial Corp (TSX: CIX, OTC: CIXUF) reported gross sales of CAD638 million and net redemptions of CAD97 million in January. As of Jan. 31, 2009, assets under management were CAD52.2 billion and total fee-earning assets were CAD77.5 billion.

Total sales by subsidiaries CI Investments and United Financial Corp consisted of net sales of money market funds of CAD2 million and net redemptions of long-term funds of CAD99 million. Excluding one institutional account that had CAD219 million in redemptions, CI had net sales of CAD122 million. Hold CI Financial Corp.

Food and Hospitality

The Keg Royalties Income Fund (TSX: KEG-U, OTC: KRIUF) reported sales for the 13 weeks ended Dec. 28, 2008, of CAD116.8 million, up 7.3 percent from CAD108.9 million a year ago. For the 52 weeks ended Dec. 28, sales increased 6.8 percent to CAD457.4 million.

Royalty Pool Sales increased by 2.2 percent to CAD105.8 million for the quarter and by 4.9 percent to CAD433.1 million for the year. Same store sales (sales of restaurants that operated during the entire period of both the current and prior years) declined by 3 percent in Canada and by 16.3 percent in the US for the quarter; for the year, same store sales increased by 2 percent in Canada and declined by 9 percent in the US. The Keg Royalties Income Fund is a buy up to USD6.